Freddie Mac Streamlined Modification
The Freddie Mac Streamlined Modification (“Streamlined Modification”) provides a modification opportunity to severely delinquent borrowers without the need to submit a Borrower Response Package.
The Streamlined Modification offers the same modification terms and Servicer incentives as the Freddie Mac Standard Modification. However, Streamlined Modification is an initiative intended for borrowers who are at least 90 days but not more than 720 days delinquent on their mortgage payments, has slightly different eligibility/ineligibility requirements, and offers a faster modification process.
The Streamlined Modification requires Servicers to identify the population of eligible borrowers and to send eligible borrowers a Streamlined Modification solicitation letter and Streamlined Modification Trial Period Plan Notice. Upon receiving the solicitation letter, the borrower can simply submit the modified payment to begin the trial period. Borrowers who successfully complete the trial period plan may enter into a permanent modification.
Requirements differ for borrowers whose hardship resulted from an Eligible Disaster. Please visit our Disaster Relief Policies page for more information.
Freddie Mac and Fannie Mae are aligned on Streamlined Modification under the Servicing Alignment Initiative. For more information, see Single-Family Seller/Servicer Guide (Guide) Chapter B65, Workout Options.
Mortgage and Borrower Eligibility
Eligible Property Types
The following property types are eligible for the Streamlined Modification:
- A primary residence, second home or an investment property (i.e., owner-occupied or non-owner-occupied).
- Vacant properties, including condemned properties.
Borrowers may be eligible for this modification if they meet the following requirements:
- The borrower must be 90 days to 720 days delinquent.
- The pre-modified mark-to-market loan-to-value (MTMLTV) ratio (gross unpaid principal balance of the current loan, including any principal forbearance as a result of a prior modification, divided by the property value obtained in accordance with Guide Section B65.16, Property Valuation Requirements) must be greater than or equal to 80 percent.
- The mortgage originated at least 12 months prior to the evaluation date for the modification.
- The principal and interest (P&I) payment must be less than or equal to the pre-modification principal and interest payment. (Note: The P&I payment does not need to be a 10 percent reduction.)
- The mortgage is a conventional first-lien mortgage currently owned, guaranteed, or securitized by Freddie Mac.
- The borrower is not deemed ineligible based on the exclusions listed in Guide Section B65.12.1.
*Refer to Guide section B65.12.1(g) for eligibility requirements for borrowers who were current or less than 31 days delinquent at the time of an Eligible Disaster.
Solicitation and Documentation
Servicers may immediately offer eligible borrowers the new Freddie Mac Streamlined Modification. Effective July 1, 2013, Servicers must evaluate any borrower who is at least 90 days delinquent but not more than 720 days delinquent for a Streamlined Modification if:
- The Servicer has not received a complete Borrower Response Package prior to the 90th day of delinquency.
- The Servicer previously conducted an evaluation of a complete Borrower Response Package and determined the borrower was not eligible for any alternative to foreclosure.
- The borrower has rejected all other alternatives to foreclosure offered by the Servicer.
- The Servicer has received a completed Borrower Response Package but has not completed an evaluation of the package by the date a Streamlined Modification solicitation will be sent to the borrower.
If a borrower is eligible, the Servicer must send a Streamlined Modification solicitation letter and a Streamlined Modification Trial Period Plan Notice. Freddie Mac offers templates of the letter and notice that include the level of specificity that Freddie Mac expects. Servicers that choose to use these templates are required to modify them as necessary to comply with applicable law and to address other unique situations of certain borrowers, such as the inclusion or exclusion of certain escrow language. The notice will include key terms, including rate, term, and forbearance.
Eligible borrowers are not required to complete a Borrower Response Package, and the Servicer is not required to verify or document the borrower's income or an eligible hardship. Borrowers who successfully complete a trial period plan will enter into a permanent modification.
The Streamlined Modification must result in a principal and interest payment that is less than or equal to the pre-modification principal and interest payment.
Servicers may continue to evaluate and solicit eligible borrowers for a Streamlined Modification after sending the initial solicitation; however, Servicers may not send a Streamlined Modification trail period plan notice to a borrower who is 720 days or more delinquent as of the Servicer's last evaluation date.
Servicers must stop solicitation attempts 60 days prior to the foreclosure sale date for a judicial foreclosure and 30 days prior to the foreclosure sale date for non-judicial foreclosures.
Refer to Guide Section 64.6, Evaluation Hierarchy, Borrower Solicitation and Communication, for complete borrower solicitation requirements.
If the gross unpaid principal balance (UPB), before capitalization, creates a mark-to-market loan-to-value (MTMLTV) ratio that is greater than or equal to 80 percent, Freddie Mac Servicers are delegated the authority to determine the proposed modification terms and final eligibility based on the following:
- Capitalize the arrearages in accordance with Guide Section B65.23, Expenses, Delinquent Amounts, and Capitalization Rules.
- Adjust the interest rate to the fixed rate published on the Standard Modification Interest Rate Web page that is in effect on the date of the borrower's evaluation.
- Extend the amortization term to 480 months from the modification effective date.
- If the pre-modified MTMLTV ratio is greater than 115 percent, forbear the principal to create a post-modification interest-bearing MTMLTV ratio of 115 percent or forebear 30 percent of the post-capitalized UPB, whichever forbearance amount is less.
We are currently enhancing Workout Prospector® and it will be updated with the Streamlined Modification on July 15, 2013.
In the interim, Servicers may begin evaluating borrowers for a Streamlined Modification Trial Period Plan and generate the terms of the trial period plan using their own proprietary systems or a third-party system. Servicers must still report the Streamlined Modification Trial Period Plan to Freddie Mac via Electronic Default Reporting (EDR) even if they processed the mortgage using their own proprietary systems. Once Workout Prospector is updated with the Streamlined Modification, Servicers must submit to Workout Prospector any loans which they have processed in their proprietary systems under Streamlined Modification terms.
Reporting and Incentives
Electronic Default Reporting (EDR)
By the third business day of each month, Servicers must report the following applicable EDR default action codes for the previous month's Streamlined Modification activity:
- TM – "Modification Trial Period": Report default action code TM to notify Freddie Mac that the borrower has entered into a Trial Period for the Streamlined Modification as described in Guide Section B65.12.1. Servicers must report this code along with the Trial Period Plan Effective Date each month during the Trial Period.
- HD – "Modification in Review": To report that the borrower is being evaluated for a Streamlined Modification. Servicers are required to report this code along with the date they begin reviewing the loan. Servicers will only do this one time in the month following the month in which the event took place.
- HE – "Ineligible for Modification": To report that the borrower is ineligible for a Streamlined Modification. Servicers are required to report this code along with the date they made the decision. Servicers will only do this one time in the month following the month in which the event took place.
Servicers will receive incentives for successfully settled Streamlined Modifications based on the term of delinquency when the trial period plan starts:
- $1,600 for each Streamlined Modification that is less than or equal to 120 days delinquent (less than or equal to 150 days from the due date of last paid installment [DDLPI])
- $1,200 for each Streamlined Modification that is 121-210 days delinquent (151-240 days from DDLPI)
- $400 for each Streamlined Modification that is greater than 210 days delinquent (greater than 240 days from DDLPI)
Servicers are required to settle a Streamlined Modification successfully by complying with all eligibility, underwriting, documentation, closing, and reporting requirements, including submitting accurate closing data to Freddie Mac, within two months after the trial period ends to be eligible to receive the financial incentives.
Single-Family Updates and News Articles
- Guide Bulletin 2013-5: Freddie Mac Streamlined Modification webinar - available through the Learning Center